Property and casualty insurers saw slower growth in underwriting gains and paid less of that growth out in claims in the first quarter, suggesting the industry may be softening after a profitable four-year run.
According to a quarterly analysis by TheStreet.com Ratings, the industry reported a 2.7% increase in underwriting gains in the first quarter to $8.9 billion, from $8.7 billion in the first quarter of 2006. This year-over-year growth has slowed dramatically from double-digit growth in the previous five years.
The industry also reported a loss ratio -- the percentage of each premium dollar received that is paid out in claims and claims-related expenses -- of 64.7%, the lowest in more than 14 years. Its combined loss ratio -- claims plus claims-related expenses as a percentage of each premium -- came in at 91.1%.
With the property and casualty insurance market softening across all lines of business, it will be a challenge for insurers to sustain such attractive results in an increasingly competitive market. Insurers are forced to lower prices while taking on more risk, benefiting consumers through more stable -- or lower -- premium rates and better, easier-to-obtain coverage.Insurers, conversely, will likely have to take on more risk by providing insurance they may have otherwise rejected or charged a higher premium. The insurers are apt to take on that risk in order to gain the premium and invest it for potential investment gains.